New York Tenants Push to See Now-Affordable Trophy Space
When COVID hit, New York lost more than 90% of its office space demand between mid-March and June.
Even though Class A office space is now generally more available than pre-crisis and at more affordable rates, the share of tours in premium spaces has remained remarkably stable at 62% of all tours in each period.
Except for one city, that is—New York.
Here, during the recovery months of June through October, tours of Trophy or Class A share rose to nearly 70% of all tours. In the pre-crisis months of January, February, and early March, with fewer options to choose from, a little over half (55%) of tours in New York were for Trophy or Class A office spaces.
This is one of the findings of VTS’ new office demand index, or VODI, which was designed to provide visibility into real-time tenant demand in the US office leasing market by capturing tenant tours.
For all cities, there have been some commonalities: Activity in the typical peak months of spring was lost to the COVID-19 crisis, for starters. Then, after posting positive growth during the summer months, the threat of rising COVID-19 cases eliminated the October bump in almost all markets.
But, it noted, while US markets share similar timing, the size of the demand shock and pace of recovery has varied significantly.
In New York City, that has translated into a flight for quality that is now affordable for many tenants.
When COVID hit New York lost more than 90% of their office space demand between mid-March and Spring, according to VTS. Then in June, tenant demand jumped 9 points and 14 points in July to a VODI score of 31. The city’s recovery slowed afterward and fell five-points in October even as other markets began their recovery in September.
A more traditional metric also underscores the city’s latest decline—and suggests continued prospects for bargain-hunting tenants—leasing activity dropped 55% in November from the previous month, and 80% year-over-year, according to a report from Colliers International.
A total of .79 million square feet in lease transactions closed in Manhattan last month, compared to 3.58 million square feet in November 2019, with negative absorption of nearly 3 million square feet.